Advice for first time home buyers

One of the challenges that many first time home buyers face is figuring out how much house they actually need. There’s often a big difference between what you need (and can comfortably afford) and what your pre-approved loan amount can buy you.

As tempting as it is to start looking at houses at the high end of your price range, the trouble is, that once you’ve seen what you can buy at the top end of your price range, it can be hard to “settle” for the kind of house that’s more appropriate for your budget. Not only do larger houses carry a larger price tag, they also cost more to maintain, their property taxes are higher and you need to buy more furniture to put in them! When looking to buy a house, it’s important to start with what you can comfortably afford rather than what you’re able to borrow.

My suggestion is to live for several months as if you were already paying that mortgage amount and all the other expenses that go with a new house allows you to see if it’s really within your means.  This may also help you save a bit more towards the purchase.

Without savings, you’re vulnerable. Any unexpected expenses, no matter how small are likely to push you into debt and it doesn’t take long to get behind.

Buying a house with a down-payment of less than 20% means that you are required to take out an additional loan and that adds to your mortgage balance and increases your monthly payment.

Too often, people are so focused on getting themselves onto the property ladder and out of the rental market as quickly as possible that they forget how much more they have the ability to save while they’re renting compared to owning. While it’s true that real estate can be a great investment, there are plenty of people who have been burned by jumping onto the property ladder too quickly.

The key is to save as much as you can for a down payment and make sure you have enough savings to cover your moving expenses and still leave you a decent sized contingency fund.

Simply put, if you don’t take control of your money, it will very quickly take control of you. It’s said that a lack of money is never a problem; it’s a symptom of a problem and I believe that to be true.

The choices we make about where to spend our money and how much of it to save have a direct impact on our quality of life, our net worth and our stress levels. It’s easy to justify “misspending” and often we don’t even realize that we’re contributing to our own challenges (or we’re in denial).

When we live in a society that places so much emphasis on looking wealthy versus building wealth it can be easy to get sucked into the myth that we don’t have to work for the life of our dreams, we can finance it and pay it off later.

The reality though, is that in financing our dreams, we’re actually financing someone else’s. Debt is big business and if we want to avoid putting all our hard-earned money towards helping others get rich, we need to make different choices about how we direct it.

Written by Sarah Milton